The TV ad model is 'under attack' thanks to Netflix and Spotify

The more consumers get accustomed to paying for streaming content without ads, the tougher it will be for traditional TV brands to reach consumers, says a top ad agency exec.

Netflix, Spotify and others are forcing the ad business to rethink its models.

Tech giants like Amazon are also changing the way people discover brands, which is upending traditional marketing strategies.

Greg Johns is the executive vice president and chief digital officer of Canvas Worldwide, a media buying agency that works with big marketers like Hyundai.

Johns is tasked with helping brands reach an increasingly ad-averse group of consumers – particularly an emerging generation of people who have grown up binging their favourite shows on streaming services like Netflix and never signing up for cable.

Business Insider sat down with Johns at the 2018 Consumer Electronics Show in Las Vegas to talk about the impact of streaming video on the ad industry.

Here are some highlights:

On whether we’re seeing a generation of consumers that will forever have very little tolerance for interrupting ads

Johns: Forever is too strong. But there’s no doubt that something we’re going to have to come to grips with is that even beyond millennials, people are being trained to consume content without advertising alongside it.

And that’s not just Netflix. Spotify’s success can be partially attributed to this. For the first time in the history of the internet we have a generation of people paying for content.

The ad-supported model is under attack. It may not be an existential crisis. But it will not look the same in five years.

Why advertisers should have hope

Johns: There’s an upper limit. Eventually the economics don’t work. If you can get everything in one place, you won’t need 10 different subscription products. That’s a problem for the ad business. But if you can’t get everything in one place, and you need eight, nine, 10 subscriptions to feel satisfied, then ad-supported media is going to be a part of your life.

But advertising will have to change. There’ll probably be less.

John: You are going to go from eight minutes of ads in prime time per half hour, to zero for Netflix. You’re going to need a happy medium, where tolerance could be there. If advertisers start to pay a premium for better more targeted ads, you may need fewer of them.

Amazon is shaking up how people find brands

Johns: The other threat to the ad-supported model is that you discover products on Amazon and other e-commerce services, rather than ads being pushed to you in video. That’s another big challenge. And if you look at the market caps of the tech companies versus media companies – a lot of the moves you’re seeing in media like Disney and Fox are a reaction to that.

Plus, everybody’s absolutely woken up to the fact that having access to consumer subscription data gives you the keys to the kingdom. Why wouldn’t Disney and others want to go for that?

Is the cable landscape vastly different in five years?

Johns: I never underestimate the power of inertia in this country. The cable guys are reinventing themselves…but don’t underestimate the power of 5G. When the wireless companies can deliver content without needing broadband pipes in a few years, that changes everything. I can abandon Comcast or Spectrum today and I still need a pipe into my house. But if I don’t need them…all of a sudden, [cable companies] don’t matter as much.

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